2019 (11) TMI 429 - AT - Central Excise

Benefit of exemption - Valuation - manufacture of Recycle Polyester Staple Fiber through recycling route - benefit of serial No. 70 A of Notification No. 1/2011- CE - Appellant submits that Appellants are using inputs consisting of 95% of the Plastic Scrap and Plastic Waste including waste polyethylene terephthalate bottles and therefore the conditions of notification No. 1/2011 CE as amended are fulfilled - HELD THAT - The exemption under notification No. 1/2011- CE dt. 01.03.2011 and other analogus notification during the subsequent period were being claimed by the Appellant on the ground that they were using plastic waste in manufacture of Polyster Staple Fibre. The Notification provided exemption to the finished goods of Chapter 54 or 55 and the description of such finished goods was Polyster Staple Fiber or Polyster filament yarn manufactured from plastic scrap or plastic waste including waste polyethylene terephthalate bottles falling under chapter 54 or 55 . The Appellant s contention is that Popcorn so produced is plastic waste and used in production of PSF and hence the same being manufactured from Plastic waste is eligible for exemption. They have also sought reliance upon and interpreted the report of CIPET, IIT Kharagpur etc to canvass their point that the popcorn should be considered as plastic waste. The subject exemption is available to finished goods if the same are manufactured by plastic waste. We find that the Appellant has brought yarn waste and converted the same into popcorn. What has been tested by the Man Made Textile Research Association is Polyster Popcorn and even the CIPET report is about PET waste. The IIT report is also about Popcorn considering it to be plastic waste. However the facts remains that Yarn waste was brought by the Appellant and converted into Popcorn. It is appropriate to remand the case back to the adjudicating authority to decide the case afresh by taking into consideration the contentions of the Appellant afresh viz. the reports of various institutes relied upon by the Appellant and also to consider the case that the small use of popcorn from yarn waste would not debar the Appellant from exemption. The percentage of small quantity of yarn waste as claimed by the appellant was not ascertained, which is important to draw a conclusion for eligibility of exemption - appeal allowed by way of remand.

Summary

Issues:
Interpretation of exemption notification for finished goods manufactured from plastic waste and yarn waste; Admissibility of exemption under notification No. 1/2011-CE; Classification of inputs as plastic waste or textile material; Consideration of reports from CIPET, IIT Kharagpur, and Man Made Textile Research Association; Requirement of following conditions of exemption notification; Percentage of yarn waste used in manufacturing process; Bar on availing exemption due to use of yarn waste in production.

Analysis:
The Appellate Tribunal CESTAT Ahmedabad considered an appeal filed by a manufacturing company against an Order-in-Original passed by the Commissioner, Central Excise, Surat. The company was engaged in manufacturing Recycle Polyester Staple Fiber using plastic waste, including PET bottles, and yarn waste. The company availed exemption under notification No. 1/2011-CE for the period October 2015 to June 2017. The issue revolved around whether the company's use of yarn waste in manufacturing popcorn, which was then used in producing Polyester Staple Fiber, made them ineligible for the exemption.

The Appellant argued that they fulfilled the conditions of the exemption notification as they used 95% plastic waste in their manufacturing process. They contended that popcorn made from yarn waste should be considered plastic waste, making them eligible for the exemption. The Appellant relied on various judgments and reports from CIPET, IIT Kharagpur, and Man Made Textile Research Association to support their claim.

The Revenue, represented by the Authorized Representative, argued that the exemption was clear and only applicable if goods were made from plastic waste. They maintained that the company used yarn waste, not plastic waste, in their production process, thus rendering them ineligible for the exemption.

After hearing both sides, the Tribunal found that the company had indeed used yarn waste to produce popcorn, which was then used in manufacturing Polyester Staple Fiber. Although reports suggested that popcorn could be considered plastic waste, the Tribunal noted that the primary input was yarn waste. Therefore, the case was remanded back to the adjudicating authority for a fresh decision, considering all contentions and reports presented by the Appellant, especially regarding the percentage of yarn waste used and its impact on exemption eligibility.

The Tribunal clarified that it was not expressing any views on the merits and left it to the adjudicating authority to determine the case after reevaluating the submissions. The impugned order was set aside, and the case was remanded for further consideration.